ETHICS HAVE BEEN KNOWN to go into a stall at the Boeing Co. Last week it was a nosedive. Pentagon officials said the company has agreed to knock another $900 million off the deal for 100 new military refueling tankers, caving to the pressure of critics who think Boeing's price was a taxpayer rip-off. At the same time, the National Legal and Policy Center, a D.C. group promoting honesty in government, called for the rescinding of an award just given to Boeing Chairman Phil Condit in the wake of a criminal investigation into Boeing's alleged theft of documents from a defense competitor. And then there was that Forbes magazine list of best and worst bosses ranking Condit among the worst, giving him an F for making a $1.5 million annual salary plus gobs more in compensation while his stockholders get annual negative returns. Conversely, Forbes' No. 1 best boss in the U.S. was Amazon.com's Jeff Bezos, who, for $81,000 a year, delivers a 55 percent return to stockholders. And he didn't pull his headquarters out of town.
Undaunted, Boeing this week began accepting supplications from states offering tax breaks and freeway interchanges in hopes of being the final-assembly point for the new 7E7 jetliner. None is expected to demand that Boeing, in return, please not rip them off. As a Seattle Times editorial begged Monday, "We want to win. Tell us what we've got to do to win."
Boeing won't confirm that it has slashed the proposed rent on its planned new fleet of tankers for the Air Force, a pork-laden deal cooked up by Sen. Patty Murray, D-Wash. The 767 aerial refuelers would be built in Everett, converted in Wichita, and leased one by one to the Air Force. To the delight of one of her biggest campaign backers, Murray slipped the then-$20 billion lease proposal into last year's $318 billion defense-spending bill, with a House assist from fellow porker U.S. Rep. Norm Dicks, D-Bremerton. Simple math showed, however, that the Air Force would actually lose money by leasing instead of buying. "How in the world," asked an irate Sen. John McCain, R-Ariz., "can you justify such a thing?" Well, it was good for Boeing, Murray said (see "She Loves Pork," Jan. 2, 2002). The blatant giveaways have now been peeled away by compromise and could be slimmed down even more, leaving a $14 billion deal. Nonetheless, Sen. Ted Stevens, R-Alaskaanother Boeing buddycalled the delays "unconscionable."
THE LAZY B did confirm, however, that the Justice Department and Air Force have started civil and criminal investigations over allegations that a former Lockheed Martin Co. engineer hired by Boeing in 1997 brought with him a stash of proprietary Lockheed documents. As recently reported by The Wall Street Journal, the cost and planning specs were allegedly used by Boeing to outfox Lockheed for a contract to build rockets for military satellites. Boeing says it didn't know the cheating was going on, and upon learning the engineer possessed a competitor's documents, fired him and informed the government and Lockheed. The engineer later sued, claiming he had only been following Boeing's orders, but he lost in court last year.
Unfazed by such news, an old-boys club, the Private Sector Council, honored Condit at a D.C. banquet last week for his "service to the nation." Kenneth Boehm, chair of the rival National League and Policy Center, called it a celebration of corporate greed. He also cited a "disturbing pattern" of misbehavior by Boeing, including an arguable $106 million in costs improperly charged to the Air Force in 2001, noting, "This is clearly not a model company."
Boeing has been hit with more than $110 million in actual government-levied fines and settlements in the past five years. Go back three decades and you'll find a corporate rap sheet that includes bribery, kickbacks, fraud, and military-contract and export-law violations. Boeing denies it breaks such laws intentionally. But it was difficult not to notice last week that, even should it end up paying millions in fines in the Lockheed case, the company has already won the lion's share of the contract, worth up to $40 billion. That's darn cost-effective.